創力 (LTRX) 2011 Q4 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the fourth-quarter and full fiscal year 2011 Lantronix Incorporated earnings conference call. My name is Stacy, and I will be your conference moderator for today. At this time all participants are in listen-only mode. We will conduct a question-and-answer session towards the end of the conference. (Operator Instructions). As a reminder, this conference call is being recorded for replay purposes. I would now like to turn the presentation over to your host for today, Ms. E.E. Lukowski. Please proceed.

Thank you, Stacy. Good afternoon, everyone, and thank you for joining Lantronix's fiscal 2011 fourth-quarter and year-end conference call. Joining us on the call today are Kurt Busch, Lantronix's Chief Executive Officer and Jim Kerrigan, Lantronix's Interim Chief Financial Officer. A live and archived webcast of today's call will be available on the Company's website at www.lantronix.com. In addition, a phone replay will be available through September 22 by dialing 888-286-8010 in the US, or for our international callers, 617-801-6888 and entering pass code 39975276.

As a reminder, during the course of this conference call, management may make forward-looking statements in their prepared remarks and in response to your questions and statements regarding future financial metrics including non-GAAP profitability and cash flow. These forward-looking statements are based on Lantronix's current expectations and are subject to a number of risks and uncertainties. Actual results could differ materially as a result of several factors. For more detailed discussion of these risk factors and other risks and uncertainties, see the Company's recent SEC filings including its Form 10-Qs filed for the fiscal quarters ended March 31, 2011, December 31, 2010 and September 30, 2010, as well as its Form 10-K filed for the fiscal year ended June 30, 2010.

Readers are cautioned not to place undue reliance on these forward-looking statements which speak only as of the date hereof, and the Company undertakes no obligation to update these forward-looking statements to reflect subsequent events or circumstances. I would now like to turn the call over to Jim Kerrigan, Interim Chief Financial Officer, who will review the Company's financial results. Jim?

Thank you, and good afternoon, everyone. In addition to GAAP results that we'll discuss, we'll report adjusted net income and adjusted operating expenses referred to as non-GAAP net income or loss and non-GAAP operating expenses respectively and non-GAAP net income, or loss per share. Please refer to our current earnings release posted in the Investor Relations section of our website where we've provided definitions for these non-GAAP financial measures as well as reconciliations of Lantronix's non-GAAP financial measures to GAAP. We believe that the presentation of non-GAAP financial measures provides important supplemental information related to the Company's financial condition and results of operations. The non-GAAP financial measures disclosed by Lantronix should not be considered a substitute for, or superior to, financial measures calculated according to GAAP. And the financial results calculated according to GAAP and the reconciliations to financial statements should be evaluated carefully. Also, non-GAAP financial measures used by Lantronix may be calculated differently from and therefore may not be comparable to similar non-GAAP information provided by other companies.

Before I discuss the detailed results for the fourth fiscal quarter and fiscal 2011, I'd like to highlight 2 items that occurred during the quarter and the impact they had on the financial statements. As reported on Form 8-K dated June 24, 2011, the Company substantially completed the independent internal investigation of certain allegations asserted by a director of the Company. For the fiscal year ended June 30, 2011, the Company incurred approximately $2.1 million of expenses related to the internal investigation. We expect to incur an additional $250,000 of expense in the first quarter of fiscal 2012 related to concluding the investigation. Also reported on Form 8-K dated June 24, 2011, the former Chief Executive Officer and former Chief Financial Officer resigned and entered into separation agreements with the Company. As a result of the separation agreements the Company recorded approximately $862,000 of expenses for the quarter ended June 30, 2011 related to severance and benefits, and they will be paid over -- benefits that will be paid over future periods according to the terms of the respective agreements. We expect to incur approximately $150,000 of expenses in the first fiscal quarter of 2012 related to consulting services, per the terms of the separation agreements.

I'd like the to point out that today we will file our 10-K with the SEC, which represents our annual report. This document, which will be available online on our website, contains final audited financial information and commentary, more than is possible for us to discuss in this conference call. Because neither Kurt nor I were on board during the fiscal year just completed, we may suggest that some of the questions asked during this call be referred directly to the 10-K or the Company's other earlier SEC filings for expanded clarification.

Now, numbers. Turning to our financial results for the fourth fiscal quarter and fiscal year 2011. Net revenue for the June quarter was $12.0 million, an increase of 2% compared to $11.8 million for the fourth fiscal quarter of 2010. The increase was a result of an increase in net revenue from our Device Enablement and Device Management product lines. This was partially offset by a decrease in net revenue from our non-core product lines. For the 2011 fiscal year, the Company recorded net revenues of $49.3 million compared to $46.4 million for the fiscal 2010 year.

During the June 2011 quarter, gross profit margin decreased to 46.1%, compared to 50.8% for the fourth fiscal quarter of 2010. For fiscal year 2011, gross profit margin decreased to 49.5% compared to 52% for the same period last year. Gross profit margin declined as a result of, first, an increase in inventory reserves related to slow moving products and excess materials for certain end-of-life products. Second, an increase in warranty expenses related to specific product issues. And finally, product mix as a result of lower sales of certain products increasing as a percentage of revenue. Barring a continued increase in warranty or inventory reserves, the Company believes that gross profit margins will be in the range of 49% to 51% in fiscal 2012.

GAAP operating expenses for the June 2011 quarter were for $9.1 million, an increase of $2.6 million compared to $6.5 million for the June 2010 quarter, primarily due to increased selling, general and administrative expenses. For the fiscal year ended June 30, 2011, our total GAAP operating expenses were $29.5 million, an increase of $4.1 million compared to $25.4 million for the fiscal year ended June 30, 2010. This was primarily due to increased SG&A and R&D expenses. SG&A expenses were $7.3 million, an increase of $2.5 million compared to $4.8 million for the fourth fiscal quarter of 2010. The increase in SG&A expenses for the fourth fiscal quarter of 2011 was the result of approximately $1.7 million of expenses related to the internal investigation and $862,000 of expenses related to separation of the former CEO and CFO, as discussed earlier. For the fiscal year 2011, our total SG&A expenses were $22.4 million, an increase of $3.4 million compared to $19 million for the previous fiscal year. R&D expenses were $1.8 million, an increase of $61,000 compared with $1.7 million for the same quarter last year. R&D expenses for fiscal 2011 were $7 million, an increase of $695,000 compared to $6.3 million for fiscal 2010.

Non-GAAP operating expenses for the fourth fiscal quarter of 2011 were $6.1 million, an increase of $190,000 compared to $5.9 million for the fourth fiscal quarter of 2010. Non-GAAP operating expenses for fiscal 2011 were $23.6 million compared to $22.8 million for the prior fiscal year.

GAAP net loss for the June 2011 quarter was $3.6 million, or $0.34 per share compared to the GAAP net loss of $509,000, or $0.05 per share for the June 2010 quarter. Included in GAAP net loss for the fourth fiscal quarter of 2011 was approximately $1.7 million of expenses related to the internal investigation and $862,000 of expenses related to the separation of the former CEO and CFO. GAAP net loss for the year was $5.3 million compared to a net loss of $1.5 million for fiscal 2010. Non-GAAP net loss was $433,000, or $0.04 per share compared to non-GAAP net income of $169,000, or $0.02 per share for the fourth fiscal quarter of 2010. Non-GAAP net income for the year was $1.3 million, or $0.12 per share, compared to non-GAAP net income of $1.6 million, or $0.15 per share for 2010.

Turning now to the balance sheet. Cash and cash equivalents were $5.8 million as of June 30, 2011 compared to $10.1 million as of June 30, 2010. The decrease in cash was mainly due to payments associated with the increase in inventory and payments of expenses related to the proxy contest and internal investigation. Net inventory was $9.2 million as of June 30, 2011 compared to $6.9 million as of June 30, 2010. The increase in inventory was due to an increase in safety stock of certain products to ensure the on-time fulfillment of customer demand as well as the increase in the SLS product family as a result of lower than forecasted demand. Accounts payable were $8.4 million as of June 30, 2011 compared to $6.5 million as of June 30, 2010. The increase was due to the increase in inventory and costs associated with the investigation.

Working capital was $5.2 million as of June 30, 2011 compared to $7.6 million as of June 30, 2010. The decrease in working capital is mainly due to the cost and payments related to the investigation, the contested proxy and separation of the former CEO and CFO. I would now like to turn the call over to Kurt Busch who joined the Company at the end of August as Lantronix's President and CEO.

Thank you, Jim. Jim has just spent the last few minutes giving you the financial details of what occurred during our last fiscal year and the background regarding the circumstances which negatively affected the Company's financial results for fiscal year 2011. It has been a little over two-and-a-half weeks since I joined Lantronix, and my purpose today is to share with you why I'm excited to be here, what is going on today at the Company, and what are the next steps your management team and Board will be taking to create long-term value our customers, our employees and you, our shareholders. I will not tell you that I have all the answers today. 17 days is not a lot of time, but I do believe that our Company has taken some good first steps.

I believe the most important of these steps was engaging quality interim management. In the days that follow the disclosure of the results of the independent investigation and the resignations of Lantronix's former CEO and CFO, your Board of Directors, interim CEO, Larry Sanders and interim CFO, Jim Kerrigan came together and dedicated many, many hours of hard work to ensure a smooth transition and took the necessary steps that ultimately have made my entry into Lantronix much easier. I especially want to thank Larry Sanders who did a great job as interim CEO of clearing the path so that I could hit the ground running.

As some of you may know, I've spent more than 20 years in the technology connectivity industry. Most recently, I was senior vice president and general manager of the high speed analog business unit at Mindspeed, where I led a team that successfully launched and marketed dozens of new products that were responsible for significantly growing the Company's revenues and extending its reach across broad markets. I'm pleased to have the opportunity to lead Lantronix during an exciting time in machine-to-machine connectivity marketplace. As many of you know, Lantronix has had a long-established reputation as a leader and innovator in developing high quality, secure, smart solutions for device connectivity, as well as having a world-class engineering team. These factors, along with the Board of Directors' focus on profitable growth were what attracted me to the Lantronix opportunity.

Another factor I found attractive is our well-established customer base. Over the years, Lantronix has built a solid worldwide distribution network. Our distributors and value-added resellers span the globe, and their customer reach extends into a wide range of markets. Finally, and what I think is most important, is the fact that we have an engaged and passionate team of people here at Lantronix. Like you, many of them are shareholders as well. They are energized, eager and committed to achieving success for our key partners, customers and our shareholders. This has been something that I have seen from the first day I started and it extends from the boardroom to the warehouse. My focus and the focus of the entire team here at Lantronix over the next few weeks will be to develop and put in place a plan that will leverage these Lantronix assets to refine our product strategy and move forward in creating enhanced value for all of our stakeholders. On that note, I want to share with you some of the steps we will be taking over the next few weeks and months.

We are concentrating on increasing our margins, decreasing our inventory and ensuring for strong financial discipline is in place. We'll be reaching out to our customer base to help redefine our product strategy. Our goal here is to work with our customers to create a product strategy that will leverage Lantronix sales channel and technology expertise to both expand our market share, as well as expand the size of the markets we address, making sure we have the right leadership and resources in place to execute. Our focus will be on identifying and recruiting key finance, sales and marketing talent. Ultimately, our objective will be to define and build a product development machine that will drive growth and value for the Company.

Let me end by saying that I believe strongly that Lantronix has the ingredients to be successful. That's not to say that the task before us is going to be easy, and I know that actions and results speak louder than words. I look forward to sharing with you the actions, results and progress we are making in the upcoming quarters. Before turning the call over for questions, I'd like to take the opportunity to thank my Lantronix colleagues, our investors, our partners and especially our customers for your ongoing support. Operator, we would like to open the call for questions.

Thank you. (Operator Instructions).

At this time, I'd like to turn the call back to Mr. Busch for closing remarks.

Thank you, operator. I'd like to thank you for your participation on our call today. We look forward to speaking with you when we report our first quarter results in November. Thank you.

We thank you for your participation in today's conference. This does conclude your presentation. You may now disconnect, and have a great day.